Under Section 138 of the Negotiable Instruments Act, 1881, a cheque that is returned unpaid for insufficient funds is an offence if the payee sends a written demand notice within 30 days of receiving the bank's return information, the drawer does not pay within 15 days of receiving the notice, and the payee files a complaint within one month after that period ends.
- Category
- Criminal Proceedings
- Court or forum
- Trial and subordinate courts, High Court
- Type of content
- General information, not legal advice
- Last updated
Purpose and background
Section 138 applies where a cheque was issued to discharge a legally enforceable debt or liability, was presented to the bank within its validity, and was returned unpaid because the account had insufficient money or the amount exceeded the arrangement with the bank. The punishment can be imprisonment of up to two years, a fine of up to twice the cheque amount, or both. The offence is compoundable under Section 147, so the parties can settle.
The Act also lets the court order the drawer to pay interim compensation of up to 20 percent of the cheque amount during the trial (Section 143A), and requires an appellant who has been convicted to deposit at least 20 percent of the fine or compensation when appealing (Section 148).
Jurisdiction: where is it filed?
The complaint is filed before a Judicial Magistrate or Metropolitan Magistrate. Under Section 142(2), the court within whose local limits the branch of the bank where the payee holds the account is situated has jurisdiction when the cheque was delivered for collection through an account. The High Court hears revision petitions and petitions to quash, and appeals from the Sessions Court.
Procedural stages
- Present the cheque to the bank within its validity period and obtain the return memo stating the reason for dishonour.
- Send a written demand notice to the drawer within 30 days of receiving the information from the bank, stating the cheque details and demanding payment of the amount.
- Wait for 15 days from the date the drawer receives the notice. If the drawer pays in that time, the offence does not arise.
- If there is no payment, file the complaint within one month after the 15 days end, with the cheque, the memo, the notice and proof of delivery.
- The Magistrate takes cognizance, issues summons, and the case follows the summary trial procedure.
- The court gives its judgment. Either side may appeal or seek revision as the law allows.
Documents commonly required
- Original cheque and the bank's return memo
- Copy of the demand notice with postal receipt and proof of delivery
- Reply from the drawer, if any
- Documents showing the debt or liability, such as an agreement, invoice or statement of account
- Affidavit of evidence
- Authority or vakalatnama
Limitation and timing
The three time limits are strict: 30 days to send the notice, 15 days for the drawer to pay, and one month to file the complaint. The court can take a late complaint on record if the complainant shows sufficient cause for the delay. Verify the dates with an advocate before acting.
Common questions
What are the time limits in a cheque bounce case?
The notice must be sent within 30 days of receiving the bank's information that the cheque was returned. The drawer has 15 days from receiving the notice to pay. If the drawer does not pay, the complaint must be filed within one month after those 15 days.
Can a cheque bounce case be settled?
Yes. The offence under Section 138 is compoundable under Section 147 of the Act, so the parties can settle at any stage with the permission of the court, and the court may impose costs where the settlement comes late.
How long is a cheque valid for presentation?
A cheque is generally valid for three months from its date, under the Reserve Bank of India's rules. A cheque presented after that period cannot be the basis of a Section 138 complaint.
Official references
- India Code, for the text of Central Acts
- Supreme Court of India
- Official website and rules of the High Court concerned
- How to find the right High Court